Value Systems : Three Business Contexts
John is Associate Professor of Finance, at the California Polytechnic State University.
He specializes in Corporate Finance, Business Ethics, and Economic Philosophy. John is a Charter Member of the International Institute of Economics, Business, and Ethics.
This article was first published in the Electronic Journal of Business and Organization Ethics, based in Finland.
You can mail John at firstname.lastname@example.org
"The Age of Unreason may become an Age of Greatness"
-- Charles Handy, The Age of Unreason
These days we frequently hear the term corporate culture. This seems to imply that business has some form of cultural force; but the history of business activity indicates that the relationship between culture and business is one of reflection rather than creation: business does not create or shape the surrounding culture but rather reflects whatever culture prevails. From the street vendors of ancient Babylon to today's multinational corporation, the aspirations and attitudes of those engaged in business reflect the aspirations and attitudes of the prevailing cultural milieu. Furthermore, the businesses that flourish at any given time and in any given place are those that best reflect the prevailing characteristics of the existing culture. Specifically, it is the managers within these flourishing businesses who reflect these characteristics.
For example, in a recent article in the Financial Times entitled "More Top Shell Jobs For Women" (Tuesday, January 13, 1998, p. 17), Robert Cozine notes the following: "Royal Dutch-Shell, one of the world's largest oil companies, plans to shake up its tradition-bound corporate culture by increasing the number of women and range of nationalities in its top management tier". The main reason for this shake up is that the "narrowness of Shell's senior management base has been cited by critics as one reason why it has struggled with rapid change in its business. Critics point to the controversy over the scrapping of the Brent Spar oil rig and Shell's problems with human rights in Nigeria. They say a broader management base might have helped Shell to respond more effectively to those issues" (currently only 4 percent of Shell's 400 senior managers are women). In short, culture changes continually but Shell's culture in recent years has not: its male Anglo management structure reflected the cultural values of thirty years ago, but not the values of today. The broad challenge of business management, therefore, is to develop an ability to read and interpret these often subtle cultural shifts, and to understand how these shifts impact the role of business in society.
The central premise of this paper is that business reflects culture. Building from this premise I address two basic questions. First, what will be the prevailing culture of the twenty-first century? Second, how is this culture going to be reflected in the attitudes and aspirations of business management? In answering the first question I identify the dominant culture of the twenty-first century as that embraced by the general label of postmodernism. Hence, in answering the second question I label the manager of the twenty-first century the postmodern manager. The primary characteristic of the postmodern manager, which distinguishes this individual from the modern manager, is the former's view of business as primarily an indeterminate aesthetic activity, rather than the characteristically modern view of business as a determinate technical enterprise.
The Universes of Business
As a means of distinguishing the modern from the postmodern manager, imagine three parallel business contexts or universes. These contextual universes are identical except for the moral orientation of the managers therein. In one universe managers adhere precisely to the ontology of financial-economics: they pursue personal material wealth maximization in a logical, consistent, and unremitting fashion: they are homo economicus. I term this universe the Technical Universe.
In the second universe managers are also instrumentally rational in the sense that they apply logic and reason in the pursuit of some goal. However their goal is not strictly personal material wealth maximization. They are morally enlightened and thus temper their personal material aspirations in deference to some moral principle. They may, for example, substitute societal material wealth maximization for personal wealth maximization, or they may restrict their actions to those that will most benefit the materially least advantaged, or they may act only on the basis of universalizable moral principles such as some conception of fairness or justice. These managers are still rational in the sense that they apply logic and reason, and indeed they may on occasion act in a way that is indistinguishable from the managers in the Technical Universe. These moral managers, however, because of their belief in some overriding moral principle, cannot be relied upon to act in ways that are predictable in financial-economic theory. This is not to say that the behavior of these managers would not be predictable, once their moral principles were made clear. Indeed the fact that these managers still act in ways governed by logic and reason will make their behavior as predictable as those managers who comprise the Technical Universe. The essential difference, therefore, between the technical managers and the moral managers will be that the latter pursue goals and are subject to constraints that may be more nuanced and ethereal than the straightforward wealth-maximization goals of the technicians; just as invocations of the technician can be found in financial-economic theory, invocations of this moral manager can be found in the dictates of business-ethics theory. I term this second universe the Moral Universe.
The third and final universe that I wish to conjure is the most opaque. It is a universe that we in modernity are least familiar with because the actions of managers therein are not governed by notions of scientific logic or instrumental rationality. Managers in this universe recognize the need for material profit, and they are cognizant of the conventional rules and logic of the Moral Universe, however they do not view these reason-based enterprises as ultimate objectives. These, what I call 'aesthetic' managers pursue a goal that is hard to define in modern English. Indeed to even call it a goal may be misleading, for these managers recognize their universe as essentially one of chaotic disorder and unpredictability where rules of logic and rationality will never fit comfortably. These managers endeavor to achieve some sort of aesthetic balance and harmony in their chaotic environment. In this endeavor they are assisted by certain conceptions of the good life, and by conceptions of desirable character traits that may lead to this good life. The acquisition of these character traits and the concomitant pursuit of the good life is not achieved simply by the application of certain rules of logic, or of rationality. Indeed the whole pursuit is characterized by a marked absence of rules and set goals. It is, to all intents and purposes, an aesthetic pursuit. At one time a manager's actions may be governed by economic interest, but at other times it may be governed by compassion, or courage, or a conception of the beautiful or harmonious. Thus unlike the previous two universes, the managers in this universe exhibit more complex and multifarious behavioral patterns. Their goal is not easily defined, if indeed it can be viewed in terms of a singular goal, and the means by which they pursue this elusive goal are not easily categorized either. In essence their behavior lies outside conventional logic or rationality. They pursue a type of aesthetic truth or beauty. Or, to put it another way, they pursue a point in their lives where the truth and beauty converge. I term this universe the Aesthetic Universe.
My essential thesis in this article is that business management exists and has always existed in all three of these universes. Every business manager is and has always been to a greater or lesser degree a technician, a moralist, and an aesthete. What has varied over time and between place is the extent to which one or more of these universes dominates the others. The dominance of any one of these three universes is generally determined by the encompassing cultural milieu. Crises in business management generally develop when the universe in which management believes it resides conflicts with that of the surrounding society. To a large degree, therefore, successful management entails the ability to perceive and predict the prevailing cultural conception of business. In short, business reflects culture. As Jean Staune observes: "The vision of the world and the vision of mankind which prevail in a society have a determining influence on social and economic organization" (1996, p. 145).
As we enter the twenty-first century, a Western corporate culture is becoming ever more geographically omnipresent. At the same time, however, the epistemological bedrock of this culture is crumbling. From its inception in the reformation and renaissance, Western corporate culture has been the child of the age of reason. All the facets of modern business -- economics, rule-based or consequence-based ethics, science, technology -- are products of this reason-based instrumental rationality. The foundation of modern business is reason. But Western corporate culture itself, as with any culture, evolves and changes. In attempting to respond to this evolution and change, managers are continually confronted with the limitations of any fixed notion of reason; rationality itself evolves and shifts definitional emphasis between the Technical, Moral, and Aesthetic Universes. For example, when senior management at Royal Dutch Shell recently decided to establish a division within the company whose sole purpose was to monitor environmental and human-rights issues, this was a response to a broader cultural shift. This decision by Shell's management was no doubt financially justifiable given Shell's recent public relations disasters concerning -- in the case of the environment -- its decision to dump an obsolete oil platform in the mid-Atlantic; a decision that was reversed in the wake of public outrage. And in the case of human rights, Shell suffered and is still suffering negative publicity for its tacit support of the oppressive regime in the north African country of Nigeria: a country in which Shell has a substantial oil interest. So, given the above public relations disasters and the concomitant economic cost, Shell's decision clearly exists within the Technical Universe of financial rationality. But it does not exist entirely within this single universe. Shell's recent concern for the environment and human rights also reflects a broader cultural shift into the Moral and Aesthetic Universes. Shell's management is forced to recognize that -- as with all modern multinationals -- this massive oil company can no longer be run as a purely economic enterprise; it must, to some extent at least, be run as a moral and aesthetic enterprise also. Indeed, the much better public relations image of, for example, British Petroleum, is a direct result of BP's early recognition of this broader socio-cultural shift: BP's operations in Columbia are as potentially sensitive, in terms of human rights, as Shell's in Nigeria, but unlike Shell, BP's management has from the outset been careful to distance itself from the morally-questionable Columbian national government.
Returning to Shell, its most recent oil drilling activities in the jungles of Peru is apparently the very model of environmental and cultural sensitivity: rather than cutting a road through the jungle to its oil installations, Shell is, at great expense, flying in and out all supplies. Thus there is no simple formula, either financial or moral, for these oil giants: this once again reflects the essentially aesthetic nature of tenty-first century postmodern management.
In the soft-drinks industry, PepsiCo has recently suffered a public relations disaster that resulted in it severing all ties with Burma, a country currently controlled by a military junta. Pepsi's interests in Burma were no doubt financially justifiable initially, but Pepsi failed to realize that financial justifiability is not sufficient in today's cultural milieu. More specifically, Pepsi failed to realize that financial justification is itself a function of pricing factors -- such as human rights -- that by no means lend themselves easily to incorporation into a financial analysis. Nike, the athletic apparel manufacturer, is having similar experiences with its (economically rational) policy of targeting certain developing countries as locations for shoe assembly. In essence, Pepsi, Shell, and Nike tried to remain predominantly economic institutions within a culture that increasingly finds acceptable only predominantly moral and aesthetic institutions vis-a-vis the Moral and Aesthetic Universes.
The recent experiences of these multinationals are not unusual. In fact, as any perusal of a business newspaper will reveal, they are typical. We in Western corporate culture are in the midst of a shift in the metaphysical universe of business: we are experiencing an epistemological crisis, a paradigm shift in our conception of ratioanlity and reason in business enterprise. More precisely, we in the West are becoming increasingly unsure of the exact nature of reason. Whose reason? What is the reason behind reason? These are questions that would have had little relevance to nineteenth-century industrialists. Their mono-cultural, protestant-ethic, encyclopedic bedrock was solid. Twenty-first century business culture, however, is characterized, not by Victorian self-confidence, but by radical self-questioning. Indeed, in contrast to the recent epochs of the age of reason and of self-confidence, the West of the next millennium promises to be an age of self-doubt and self-questioning. Staune sums up this transition by noting that:
one of the great events of the end of the twentieth century is that, in all the disciplines of science, a new vision is emerging. Behind the study of the foundations of matter, the origin of the universe, behind the experiments studying how man's consciousness works, behind the playing out of the evolution of life appears a certain depth to reality. One can scientifically show that 'what is' cannot be reduced to an objective, material and measurable level. [1996, p. 146]
In the broader cultural milieu this approach of the age of self-questioning and self-doubt is reflected in the philosophy and sociology of poststructuralism and postmodernism. These philosophies challenge the bedrock of modernity by deconstructing many of the constructs upon which modernism is built: constructs such as truth, reason, and logic. Although coming to prominence in the late twentieth century, postmodernism gained much of its impetus from the writings of Freidrich Nietzsche in the nineteenth century. Nietzsche challenged the assumed certainties of his era by arguing that there is no absolute truth or absolute moral good. Concepts such as truth and good are merely weapons used by society and individuals in their continual will to power: "This world is the will to power -- and nothing besides! And you yourselves are also this will to power -- and nothing besides!" (WP, 1967). For Nietzsche, at least in his earlier writings, the only absolute was this will to power, although -- in true postmodernist fashion -- Nietzsche is equivocal even about this. For example, in his analysis of Nietzschian morality, Brian Leiter states: "I doubt whether a good argument can even be made out that 'will to power' provides Nietzsche with his standard of value" (1997, p. 267, footnote 40). Leiter suggests that Nietzsche criticizes the universal application of everyday moral dictums on the grounds that such application will stifle those few individuals capable of real creativity and excellence. Thus Nietzsche does not construct some alternative value system but merely deconstructs the modern notion of universal everyday morality. In essence, therefore, Nietzsche's universal moral principle is that there is no universal moral principle: true morality is an absence of morality; a quintessentially postmodern stance. Nietzsche's critique of the assumed self-evident truths of modernism augured our current age of radical uncertainty. Indeed, the essence of Nietzsche's critique of modernity is reflected in the writings of all contemporary postmodernists. For example, the title of Alasdair MacIntyre's 1988 book really says it all: Whose Justice? Which Rationality?.
Returning to our three business universes. The first two, those of the technical and moral, were products of reason. They reflect modernity as defined by the Enlightenment economic and moral philosophers, most notably Adam Smith in his two master-works The Theory of Moral Sentiments (1759), and, An Enquiry Into the Nature and Causes of the Wealth of Nations (1776). These works presaged and explained the industrial revolution and the rise of capitalism as economic expressions of the modernist principles of prudent reason and instrumental rationality. Smith saw no inherent conflict between what I have termed here the Moral and Technical universes. For him both were complimentary facets of the modernist metaphysic.
Business may have existed comfortably in these two universes in the last two centuries; business of the twenty-first century will, however, no longer reside in these universes. The coming age of self-doubt will necessitate business moving to a different universe, a postmodern universe. Management will have to make this shift also. It will be a shift in management paradigm. The management universe of the twenty-first century will be neither a technical universe nor a moral universe, indeed it will be no reason-based universe. The dominant business culture will be a rekindling of a culture of business that was all but entirely eclipsed in the industrial revolution. In the age beyond reason, in the epoch of self-doubt, the manager will become the postmodern aesthete.
For the first time since the inception of modernity, that is for the first time in some three-hundred years in the West, the manager-as-aesthete will dominate. So, for example, Pepsi's management realized finally that their decision to pull out of Burma in January of 1997 could not be successfully made by applying financial theory, or by applying some moral dictum, it could only be made aesthetically; in having to make a decision not based on either financial theory or moral theory, Pepsi's management were forced into the postmodern world. But why exactly did the Technical and Moral Universes prove ineffectual for Pepsi in making this decision?
A Brief Deconstruction of the Technical Universe
With the possible exception of the latter third of the twentieth century, when the moral manager has gained prominence, the dominant management paradigm of modernity has undoubtedly been the manager as technician. This manager as technician exists within the metaphysic of what I term here the Technical Universe. This Technical Universe finds its justification in the theory and empirics of financial-economic theory. Indeed this manager as technician is purely the practical manifestation of the theoretically rational agent of financial economics: the wealth maximizer, the opportunist, the logician. But who exactly is this person? We must never lose sight of the fact that the manager is a person. So what type of person is the rational agent of financial-economic theory?
A priori, we might reasonably expect that if nothing else at least this agent will be profoundly rational, where rationality would be defined in an instrumental, that is to say modernist, sense. Instrumental rationality is what designates the manager as technician, it is the essence of financial-economic theory, so surely the rational pursuit of rational objectives will characterize this person. But does it?
When we look closely at this manager as technician. When we deconstruct this construction of financial-economic theory we find something that is unexpected. This rational agent, who has the rational objective of personal material advancement, never actually achieves this objective. Indeed, more significantly, it is the very nature of the rationality adopted that ensures that this rational agent can never rationally achieve his or her rational objective (Dobson, 1996).
Thus, in short, financial-economic theory makes the odd assumption that rational agents rationally choose a rationality construct that ensures that they can never rationally achieve the rationally determined objective. Simply put, the goal of wealth maximization or some variant thereof, as conjured by financial-economic theory, and as adopted by our manager-as-technician, is subtly self-defeating. This pursuit of wealth maximization never achieves maximum wealth either for the individual agent or for the group of agents who comprise the Technical Universe. Elsewhere I have termed this phenomenon the finance paradox, for it is indeed paradoxical that a rational individual or group of individuals would knowingly adopt a mode of reasoning and behavior -- namely opportunism -- that they rationally know will render them incapable of achieving their a priori stated objective: to maximize their material wealth or, if they are risk-averse or effort-averse, their utility of wealth.
Furthermore, financial-economic theory in the guise of the technician has always claimed that this opportunistic pursuit of wealth together with the firm-wide implication of it, namely shareholder-wealth maximization, is value neutral. By 'value' here is meant moral value: financial economics has always had a self-conception as a moral-free-zone, exempt from the vagaries of moral philosophy. The careful deconstruction undertaken below, however, will reveal that financial-economic theory is not value free. It possesses an implicit moral agenda.
In the case of individual opportunism, financial economics defends its theories as morally free by either just tacitly accepting opportunism as a simplifying assumption (real behavior is too complex to model), or as just tacitly accepting such behavior as natural (a sort of tacit application of some variant of social Darwinism). In the case of the first justification, it is noteworthy that this acceptance of opportunism as a simplifying assumption is made purely on the basis of the latter's mathematical convenience. The mathematical modalability of behavior is taken as a primary criterion for building a model of the manager. In the context of human behavior, 'mathematical', and 'model building' are all characteristics peculiar to modernity.
Thus a managerial universe of pure technicians, where a pure technician is an agent who adheres strictly to the tenets of financial-economic rationality, will be characterized by economic inefficiency and instability in the short-run and likely self-destruction in the long-run. More significantly, these are not merely the predictions of a postmodern critique. These are the predictions of financial-economic theory itself!
A Brief Deconstructing of the Moral Universe
Consider perhaps the most comprehensive and widely accepted business-ethics theory yet developed, namely Integrated Social Contracts Theory (ISCT). Donaldson and Dunfee describe ISCT as a "realistic, comprehensive, and global normative theory of business ethics .." (1991, p. 32). The theory claims to establish certain hypernorms that provide a moral foundation for business throughout the world. Essentially these hypernorms all center around what we in the West call 'human rights'. In addition to the hypernorms, ISCT attempts to preempt any charge of Western cultural imperialism by recognizing the existence of culturally distinct mini-norms. These mini-norms, however, according to ISCT are always subject to justification in terms of the hypernorms.
Clearly, if it is to possess any normative bight, ISCT needs the hypernorms to be omnipotent. Otherwise, with a multiplicity of contradictory and culturally distinct mini-norms, the theory would just descend into ethical relativism. But does ISCT live up to its claims? Does it provide a normative foundation for a global business ethic? Or does it merely project the prejudices of Western modernity?
Surely human rights, however desirable we in the West may feel them to be, are a peculiarly Western and more specifically a peculiarly 'modernist' phenomenon. Human rights are an invention of Enlightenment moral philosophy. To claim human rights such as personal freedom, informed consent, and ownership of property, as universal and unequivocal hypernorms is to claim that Enlightenment moral philosophy (whatever exactly that is) has some absolute justification, that it is the Truth, the absolute presence. MacIntyre, for example, observes "there are no such rights, and belief in them is one with belief in witches and in unicorns" (1984, p. 69). He goes on to explain this position:
The best reason for asserting so bluntly that there are no such rights is indeed of precisely the same type as the best reason which we possess for asserting that there are no witches and the best reason which we possess for asserting that there are no unicorns: every attempt to give good reasons for believing that there are such rights has failed. The eighteenth-century philosophical defenders of natural rights sometimes suggest that the assertions which state that men possess them are self-evident truths; but we know that there are no self-evident truths. Twentieth-century moral philosophers have sometimes appealed to their and our intuitions; but one of the things that we ought to have learned from the history of moral philosophy is that the introduction of the word 'intuition' by a moral philosopher is always a signal that something has gone badly wrong with an argument. [Ibid.]
In his recent business-ethics text, David Fritszche states that "there are certain practices (hypernorms) such as stealing, killing, and slavery which are not condoned by any community worldwide" (1997, p. 55). Really? I am not familiar with every community worldwide, but I am familiar with my own Western community, and I could argue that -- given reasonable definitions of "stealing", "killing", and "slavery" -- all of these are condoned in my community. For example, ask a native American whether the West condones stealing. Ask a Palestinian, an Iraqi, or even perhaps an African-American whether the West condones killing. Ask the animal rights activists who have compiled a declaration of primate rights whether the West condones slavery.
In reality, ISCT, like business-ethics-theory in general, suffers from all the internal inconsistencies and incoherences characteristic of modernity. Simply put, there is no such thing as a hypernorm. Ethics is always contextual. As Paul Buller, John Kohls, and Kenneth Anderson note in their recent article on Cross-Cultural Ethical Conflicts; "a number of recent empirical studies provide evidence for different ethical perspectives across national cultures on a wide variety of specific issues" (1997, p. 173). They go on to give numerous examples of such studies. They conclude:
the preponderance of the research to date suggests strongly that different national cultures have different perspectives regarding ethical values and norms. ..national culture plays a central role in shaping moral values and standards of ethical behavior. Strong cross-cultural differences make it difficult to develop universal moral values, reasoning, and behaviors that will be meaningful and adhered to across national boundaries. [1987, pp. 173-174]
The notion of a hypernorm erroneously assumes that the Western modernist context is 'the' context. In addition, the internal inconsistencies in the theory become apparent when attempts are made to apply it. For example, consider a recent attempt to apply it by David Fritszche. Fritszche considers the example of a Western firm doing business in China. Initially he notes that "nepotism might be a micro social contract norm in an Asian community. Equal opportunity may be a norm in a Western community" (p. 45). But then of course would not nepotism (or at least the Western definition of it) contradict our human-rights induced hypernorm? Later in his discussion of ISCT Fritszche states: "Once the [Western] firm has landed a contract and begins hiring Chinese employees, it should observe equal opportunity norms (the norms of its local [Western] community that do not have an adverse effect on the Chinese) in its hiring practices" (p. 46). But wait a minute, did we not just decide that nepotism was a moral norm in China? So by adopting Western hiring practices are we not guilty of precisely the moral imperialism that ISCT was supposed to avoid? We are in essence saying that our Western hiring practices are in some absolute moral sense superior to your Eastern hiring practices, which once again broaches the question of from whence this absolute moral 'ought' of Western modernity is derived. For example, in the case of bribery, Valesquez and Brady note that "moral views on bribery appear to be culturally conditioned, and in some cultures the absolutist view of the wrongness of bribery is perceived as a form of Western cultural imperialism that is deeply ethnocentric" (1997, p. 100). Not surprisingly, given its existence entirely within the context of modernity, ISCT has no answer to this question of justifying the 'ought' of modern morality. Indeed its conceptual contextlessness precludes it from even realizing this as a meaningful question.
For example, Donaldson states that "[c]corporations ... exist to enhance the welfare of society" (1982, p. 54). But Donaldson fails to give a precise definition of this "welfare"; he goes on to say "through the satisfaction of consumer and worker interests" (ibid.), but what interests exactly, and might these interests not have been created by the corporation in the first place through advertising? Which brings us back to the question of how our modern manager is going to act so as to maximize overall welfare? Who and what is included in overall? What is welfare?
So, in short, somewhere along the line, before he takes any act, our modernist, utilitarian, societal-welfare-maximizing manager is just going to have to apply some absolute ought. But from whence is the justification for this 'ought' going to come? In Against the Self-Images of the Age MacIntyre notes that in classical Greek, Latin, and Anglo-Saxon and Middle English, the words 'ought' and 'owe' are indistinguishable. The 'ought' of the Moral Universe is a type of taboo, or what MacIntyre calls a survival:
We make a social practice intelligible by placing it in some context where the point and purpose of doing things in one way rather than another is exhibited by showing the connection between that social practice and some wider institutional arrangements of which it is a part. So the passing of a verdict has to be understood in the context of a legal system, and the concept of a home run has to be understood in the context of baseball. When we cannot make a practice intelligible by providing such a context, there are two possibilities. The first is that we have not been adequately perceptive or understanding in our investigation of that particular social order; the other is that the practice just is, as it stands, unintelligible. One hypothesis which we may advance as a result of coming to the latter conclusion, a hypothesis which has the additional merit, if it is independently supported, of supporting the latter conclusion, is that the practice in question is a survival. That is to say, we explain the practice in its present form by supposing that it is the historical product of an earlier practice which existed in a social context that has now been removed and of the consequences of the removal of that context. What do I mean by a context? A set of beliefs expressed in institutionalized social practice. Hence what I want to maintain is that the use of the ... moral "ought" can perhaps only be made intelligible as a social practice by supposing it to be a survival from a lost context of beliefs, just as the eighteenth-century Polynesian use of "taboo" can perhaps only be made intelligible by supposing it to be a survival from a lost context of beliefs. [1984a, p. 167]
Indeed even within the Nineteenth century itself this central fallibility of the Enlightenment 'ought' was recognized, most notably by Nietzsche. To illustrate this point in a contemporary business context, consider the following example. A skillful financial accountant may be able to enhance her company's reported results of operations by crafting a sale-leaseback arrangement whereby some of the company's assets are sold, a gain is recorded, all the appropriate accounting pronouncements are adhered to, and the company still has use of its assets. The intent of the transaction was never to rid the company of unwanted assets, but rather to record a gain and thus possibly avoid breaching debt-covenant agreements or circumvent regulatory requirements. A recent example of a major corporation adopting this practice is IBM during its financial crisis of the early 1990s. IBM attempted to artificially bolster its financial statements by undertaking major sale and leaseback arrangements. It rapidly dropped the practice in the face of critical public scrutiny.
In order to examine whether or not this example of creative accounting is unethical, traditional approaches would have the individual step out of her accounting role and don the hat of a Kantian (e.g., "does this action violate the rights of users of the financial statements to fairly presented financial information?"), or of a utilitarian (e.g., "does this action maximize the welfare of all stakeholders?"). In this traditional approach, therefore, a professional - whether accountant or otherwise - adopts a type of moral schizophrenia in which being a good professional in the sense of being an economically effective accountant becomes separable from being a good professional in the sense of being an ethical accountant. Thus, an accountant could be a 'good' accountant, in the sense of being very efficient and effective, yet at the same time not be a 'good' accountant, in the sense of being ethical.
Similarly, statements such as "You 'ought' to be an ethical accountant!" become problematic. Clearly, given the aforementioned separation of ethics and efficiency, such a command of 'ought' cannot be premised on the idea that being an ethical accountant will in some way engender greater efficiency. If one were to challenge this command with the question, "Why 'ought' I to be an ethical accountant?", the modernist approach to ethics would have trouble providing a simple answer beyond "You ought to be an ethical accountant because being ethical is what accountants ought to be", which clearly does not really answer the original question. Given this dual concept of the 'good' professional, therefore, it is not surprising that many practitioners feel confused. They may find themselves being simultaneously tugged in two opposing directions: in the direction of economic efficiency or profit maximization, and in the direction of adherence to some abstract professional code of conduct; some abstract 'ought' of the Moral Universe.
A Brief Construction of the Aesthetic Universe
To find the postmodern manager we must in fact seek out the premodern manager. I use the term 'artisan' to label the manager as aesthete; this is a premodern term and it labels a certain type of individual. An artisan is an individual engaged in business, but the individual's conception of business, and in particular the individual's conception of the Good of business, is very different to that of the modern manager.
The artisan views business as an art or craft in which the primary pursuit is of a certain type of excellence. The goal is not material gain or adherence to some rationality-founded moral dogma. Indeed, as the term 'art' implies, the postmodern manager pursues primarily nothing that is materially measurable or empirically observable. That is not to say that this pursuit is non-moral, for this excellence is also The Good. This pursuit may also be characterized by the generation of substantial material wealth. But neither morality nor material wealth define this excellence or Good. So what exactly is it?
I mentioned that to find the postmodern manager empirically we must look to the premodern manager; and indeed it is in the metaphysics of the premoderns that a definition of our Excellence or Good can be found. Fortunately for our purposes this premodern metaphysic has been made more comprehendible to us moderns by the resurgence of classical Greek philosophy in the latter half of the twentieth century. This resurgence is undoubtedly due in no small measure to the epistemological crises of modernity described above; the resurgence generally comes under the nomenclature of 'virtue ethics'.
So to describe the essence of the manager of the postmodern era we look to the managers, craftsmen, and artisans of the premodern era; so we return again to a pre-industrial, pre-factory, village-based business concept, albeit one based today on remote-access computer technology rather than the potter's wheel or spinning loom. The postmodern manager may work with different tools than the premodern, but the essential view of human activity as an artistic pursuit or craft, as an excellence, will be rekindled in the postmodern business era. Virtue ethics theory represents an avenue by which to make this transition from modernism to postmodernism in a business context (see Solomon, 1992). Virtue ethics theory can thus be viewed as a type of translation mechanism.
One defining characteristic of the postmodern manager, emphasized particularly in virtue ethics theory, is an holistic approach to decision making. In modernist approaches, the economic and the moral are seen as entirely separable. A manager can make, for example a capital budgeting decision, either on the basis of economic criteria such as the net-present-value (NPV), or on the basis of moral criteria such as integrated-social-contracts-theory (ISCT). But these two methods are entirely epistemologically separate; there is a dualism here so familiar to modernity. The internal crises in the Universes of the technician and the moralist are reflected in the deconstructions of the ontological foundations of these concepts as intellectual modes of enquiry; specifically what is being deconstructed are those prejudices and illusions that defined the dualism between the economic notion of the manager-as-technician and the modern philosophical notion of the manager-as-moralist. The postmodern critique reveals these two heretofore separate ontologies as just two fragile and contextual metaphysical stances. This realization within the academic cloisters of economics and ethics is leading first to radical self-doubt, and second to radical re-orientation among -- in the current context -- business management theorists and practitioners. In essence what financial economics and moral philosophy are experiencing are paradigm shifts. Interestingly, the nature of these paradigm shifts are not dissimilar in that they both reflect a conceptual broadening unfamiliar to modernism -- characterized as modernism is by identification and compartmentalization -- but very familiar to postmodernism in general and virtue-ethics theory in particular.
Undoubtedly my invocation of this manager-as-aesthete highlights the limitations of the manager-as-technician. But it in no way discredits the application of finance theory to business providing that the limitations of the latter are recognized. Capital budgeting methods such as the net-present-value rule, although analytically rigorous, are in no way antithetical to our postmodern manager. This manager-as-aesthete will still employ capital budgeting and other technical methods, but will view these as just one means of making a decision: decisions such as Pepsi's concerning Burma, or Shell's concerning its activities in Nigeria. The postmodern manager will recognize the aesthetic value judgements that underlie the analytics of capital budgeting: judgements such as the time frame assumed, the assumptions underlying cash-flow estimates and discount-rate estimates, the assumptions of time-value-of-money and reinvestment inherent in this type of analysis. All these will be recognized by the postmodern manager as forming the context of the analysis, and this context will be taken as just one possible context from which to make a decision.
So the postmodern manager's prerogative, albeit complex and multi-faceted, is in no way a purely chaotic, unstructured, and futile one; this manager is just no longer laboring under the illusion that decisions can be made correctly purely on the basis of technical or moral criteria. In pursuing these elusive internal goods of the Aesthetic Universe, the postmodern manager recognizes the need to exercise judgement in weighing the many considerations -- economic, moral, and aesthetic -- that go into sound decision making. More precisely, the postmodern manager merely realizes that any decision criterion, even something as apparently cut-and-dry as the net-present-value rule, is in reality at root just another aesthetic context from which to view the art of business.
In concluding their seminal work on the theory of the firm, Jensen and Meckling note that "whatever its shortcomings, the corporation has thus far survived the market test against potential alternatives" (1976, p. 357). This statement has since been further vindicated by recent developments in eastern Europe and the republics that once comprised the Soviet Union. We exit the twentieth century with the market system increasingly omnipresent, auguring a global corporate culture. Thus when viewed within the Technical Universe, the story of the firm-as-competitive-enterprise is undoubtedly a story of success. From the aesthetic perspective, however, there are other universes or contexts. Success in the technical universe is merely a prerequisite for entry into the aesthetic universe. This aesthetic context is, according to Aristotle, obscured by the technical paradigm where excellence is equated with efficiency in achieving solely material ends. The latter is a paradigm that is oblivious to the intrinsic value of the aesthetic universe: in economic-game-theory for example there is no virtue, no internal good, no craftsmanship or excellence save in the name of effectiveness, no communal purpose. In the competitive game of economic self-interest, truth and good become subservient to profit. Individuals -- and even ostensibly non-economic institutions such as universities -- shift their allegiance, from truth and good, to profit:
In the Republic, Plato implicitly and explicitly argues that materialism is the source of many of our moral ills. If one's value system is essentially materialistic, it encourages us to cheat, lie, steal, and the like, for if we can get away with such actions, we will be materialistically better off. [Klein, 1989, p. 62]
When Aristotle described life's ideal as one of intellectual pursuit or contemplative enquiry, he accepted that the material wealth of his society was sufficient for only a small fraction of its inhabitants to realize this ideal. In the nineteenth and twentieth centuries, wealth generated by the firm through the market system has freed the majority of humanity from the fetters of material servitude. But the victory has been Pyrrhic. To the extent that the aesthetic universe has been eclipsed in modernity by the game-theoretic technical universe, the fetters of material servitude have merely been replaced by those of aesthetic impoverishment. The tragedy of modern corporate culture is thus the tragedy of King Midas. In creating the means for unlimited material acquisition, we may have prevented ourselves from acquiring those non-material goods that we most desire.
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Ph.D, Associate Professor of Finance
Department of Business Administration
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